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Breakfast Report - 02 January 2024

Oil production fell short of target in 2023, despite high oil prices and a favourable OPEC production quota (initially 1.7 mb/d). The devaluation of the Naira and removal of subsidies were key revenue drivers for the year, as the former shored up the naira equivalent of oil USD receipts while the latter reduced the deductions made to gross oil revenues. Notwithstanding, the shortfall in oil production weighed on the contribution of oil to federation revenues. Gross oil and gas revenues (9M’23: ₦5.6 trillion) fell short of target by 21%, while non-oil revenue exceeded budget estimates by 30% (9M’23: ₦6.9 trillion). Drilling down to the Federal Government specifically, retained revenue targets were surpassed slightly (+4%), owing to higher-than-expected corporate income tax collections (+121%), which made up for the shortfalls in oil revenue, customs revenues and federation account levies. We expect tax collections to continually outperform in 2024, on the back of the aggressive revenue drive of the current administration, as geared by the Presidential Fiscal Committee.

Equity: It was an impressive run in the equity market last year, with a YTD return of 45.90%. We expect the positive sentiments to filter into the new year, as investors continue to take position in the expected growth sectors.

Fixed Income: We anticipate a quiet session on Tuesday, following a return from the New Year holiday.